Don't just focus on the Federal Reserve! The Bank of Japan is the biggest black swan in December, creating a natural capital reservoir.
In December, three major monetary policy events in the global financial markets will unfold in succession, with the Federal Reserve likely to cut interest rates by 25 basis points and stop reducing its balance sheet starting December 1, ending three years of quantitative tightening.
The Bank of Japan, on the other hand, may raise interest rates to 0.75%, the highest since 1995. This cut, pause, and rate hike have changed the global liquidity landscape.
The Japanese rate hike is not sudden; the market's bet on the likelihood of a 25 basis point rate increase in December has surged from 50% to 85%, driven by significant domestic inflation pressure and economic support.
The combination of policies affects the flow of funds. The Federal Reserve pauses its balance sheet reduction and then cuts rates to respond to slowing economic growth, while the Bank of Japan raises rates to avoid risks. The rate hike in Japan will likely absorb the funds released by the Federal Reserve, forming a natural reservoir.
Policy changes drive the repricing of global asset prices, with U.S. stocks under short-term pressure but resilient in terms of long-term profitability, cryptocurrencies being heavily impacted, and U.S. Treasury yields fluctuating upward in the short term.
A 0.75% rate hike in Japan still falls within a loose range, and further gradual rate hikes are highly likely. The rate hike in Japan is the biggest variable in the global market in December, given the triple contradictions of inflation pressure, economic weakness, high debt pressure, and policy shifts. The central bank will resolve shocks through policy roadshows.
Now, the variable of whether to hike rates is basically eliminated, and the new variable lies in the policy guidance after the rate hike and the statements from Ueda Kazuo. The Bank of Japan's decision on December 19 and the Federal Reserve's rate cut decision will follow in succession, leading global capital to realign, and retail investors should focus on the core logic of assets.
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